Decisions made by a company in the days and weeks following an unforeseen event — think flood, fire or equipment breakdown — bear directly on the success of a claim for business interruption losses. Business interruption insurance, also known as business income insurance, is usually included as part of a first party (i.e., nonliability) commercial property insurance policy. It's essential for any hospitality business, for which business income is directly related to the functioning and appearance of the business's structures.
The typical insuring clause states something similar to the following:
We will pay for the actual loss of business income you sustain due to the necessary suspension of your operations during the period of restoration. The suspension must be caused by direct physical loss of or damage to property.
Business interruption coverage is designed to replace income that would otherwise have been earned by the business had no loss occurred. Over the last year, at least three federal court decisions reminded policyholders that the success of a BI claim is contingent on promptly identifying and documenting the losses related to an interruption.